New Housing and Economic Recovery Act

Posted on August 7, 2008 | by Denny Oh

Approved by the House and passed by the Senate, the President signed the new 2008 Housing and Economic Recovery Act on July 30th, 2008. There are a number of items that need to be solidified, but generally speaking, this Act is supposed to help first time home buyers, help those who are behind on mortgage payments and ease FHA funding guidelines.

First time home buyers, are defined as those people who have not owned a home in the last 3 years. So even if youve purchased a home in the past and sold it, you can still qualify for the $7,500 tax credit. This credit is an interest free loan, of up to 10% of the homes purchase price which must be repaid within 15 years, or when the home is resold. Keep in mind, you must buy a home between now and 6/30/09 to take advantage of this credit.

There will also be a new FHA and Conforming loan limits, beginning in the new year. The Act states that the new limit will be $625,000, or 15% higher than the median home price in your area(San Diegos new limit will probably be around $650K).

Another major element is that people who are behind on their mortgage payments may get to cancel their current mortgage and replace it with a new 30 year fixed loan. Assuming the banks agree to it, the new loan will be for 90% of the propertys current value, giving the homeowner a lower mortgage payment and 10% instant equity. There will be equity sharing with the FHA, but it sounds like a great opportunity for people who need it.

Conversely, there will be a few downsides to the new Housing and Economic Recovery Act. The new FHA down payment will rise to 3.5%(from 3%) and there will be no more seller assisted down payment assistance. Currently, sellers can credit buyers with a down payment through closing costs, who are receiving FHA funding. Also, the Nehemiah loan program will be ending as of October 1st, 2008.

There will also be some changes to the capital gains tax laws. The new law will take into account how long a person has lived in the home, as well as how long theyve owned it.


If you have any questions about the new Housing and Economic Recovery Act, or about real estate/financing in general, please contact Denny Oh at or [email protected]. 858“243“2092

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Related Reads:

Good News for the San Diego Housing Market

Downtown San Diego Condo Watch

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